Employees covered by health savings accounts (HSAs) coupled with high-deductible health plans (HDHPs) are on the rise. According to a May 2010 study released by AHIP’s Center for Policy Research, during 2009, large groups covered by HSAs/HDHPs increased by 33 percent, while the small group market rose by 22 percent. At the end of the year, there were 8 million people covered by group plans such as these, including 5 million in the large-group market and 3 million in the small-group market. And in a nationwide study conducted in 2009 by Aon Consulting and the International Society of Certified Employee Benefit Specialists, the percentage of companies offering consumer-driven health plans paired with HSAs increased from the three preceding years – 56 percent, compared with 50 percent in the past.
All of this indicates that group health insurance plans featuring HSAs coupled with HDHP plans may be the low-hanging fruit for agents marketing health insurance. This is not meant to imply that marketing HSAs to businesses will be easy, but there are many signs that there is a growing interest in utilizing these plans in the group market. Many businesses already believe that offering health coverage they can afford is the right thing to do for their employees. In addition, the recently passed Patient Protection and Affordable Care Act (PPACA) stipulates that starting in 2014, most companies without health care insurance must offer it to their employees, and thus will be seeking highly affordable options.
There are several reasons for this marketing opportunity. To begin with, HSAs/HDHPs, with their numerous financial incentives for employers and employees alike, were left largely intact under the new health care bill. This same legislation includes incentives for many companies to look for such health insurance plans. In 2014, businesses with 200 employees must automatically enroll all their employees in a health insurance program, although individual workers can opt out. Companies with between 50 and 200 full-time employees need not automatically enroll them, but will face a penalty of $2,000 per employee if they don’t offer health coverage. Employees who earn below 400 percent of the federal poverty level – up to $88,200 per family – will receive a government subsidy that can be used to purchase health insurance, including an HSA/HDHP.
Employees should also become more interested in joining company-provided insurance plans because of the significant coverage changes included in the recently passed bill. Beginning this year, dependents of a person with health insurance can be covered until their 26th birthday without having to be enrolled in college. There will be no pre-existing condition exclusions for children, and no lifetime limits on benefits. By 2014, no one can be excluded from coverage for pre-existing conditions, and plans must cover fees for preventive care.
Benefits have long been viewed as a way to attract and keep employees, but offering a cost-effective, tax-advantaged health insurance plan may become an even stronger enticement in the future. The new law stipulates that beginning in 2014, individuals and their family members who are not covered by their own health insurance, a family member’s health plan, or an employer’s plan must obtain their own insurance or face a tax penalty based on a flat fee or a percent of income. Certainly, these individuals are solid prospects for individual HSAs but the idea of working for a company that sponsors such a plan will also be quite appealing for these consumers.
HSAs coupled with HDHPs are having a positive financial effect on companies and individuals alike. For companies, the high deductible levels can drive down annual premium costs: According to the Consumer-Driven Health Care Institute, employers offering HSAs pay an average of $200 per month for individual plans and $238 per month for family plans. Last year, one insurance company revealed the results of a five-year study that showed employers offering its HSAs saved $21 million per 10,000 members.
Some companies will decide to use a portion of this savings to make tax-deductible contributions to each employee’s HSA, which in turn becomes the employee’s own money. And any money that is not used each year for qualified medical expenses remains in the HSA and is owned by the employee. This encourages plan participation: A survey by one insurance carrier shows that people who might not establish individual HSAs are more willing to enroll and place personal funds in a company-sponsored plan if their employer also contributes.
Even though the structure of HSAs and the current legislative climate make these plans an ideal business choice, agents will find that many companies do not understand either of these facets. Therefore, education will be a mandatory part of capitalizing on this potential, and the key to marketing HSAs to employers and individuals alike.
Reggie Karas is the senior vice president of the alternative solutions group at Millennium Trust Company. She can be reached at [email protected] or 630-368-5674.